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AP Microeconomics
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Subjects
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economics
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ap
Instructions:
Answer 50 questions in 15 minutes.
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Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Consumer surplus
Normal Goods
Determinants of Demand
Substitute Goods
2. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Price elastic demand
Income Elasticity
Marginal Cost (MC)
Public goods
3. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Marginal Cost (MC)
Marginal Resource Cost (MRC)
Long Run
Monopoly long-run equilibrium
4. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Normal Goods
Excess Capacity
Producer surplus
Economic Profit
5. ATC = TC/Q = AFC + AVC
Fixed inputs
Average Total Cost (ATC)
Perfectly competitive long-run equilibrium
Derived Demand
6. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Average Variable Cost (AVC)
Economics
Cartel
Private goods
7. Ed = 8 - infinite change in demand to price change
Free-Rider Problem
Fixed inputs
Perfectly elastic
Total variable costs (TVC)
8. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Short run
Spillover benefits
Least-Cost Rule
Total Welfare
9. Entry of new firms shifts the cost curves for all firms upward
Shortage
Increasing Cost Industry
Accounting Profit
Monopolistic competition long-run equilibrium
10. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Derived Demand
Productive Efficiency
Monopolistic competition long-run equilibrium
Short run
11. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Market Economy (Capitalism)
Decreasing Cost industry
Resources
12. A good for which higher income decreases demand
Substitution Effect
Specialization
Market Equilibrium
Inferior Goods
13. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Monopolistic competition long-run equilibrium
Implicit costs
Marginal Benefit (MB)
Perfectly inelastic
14. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Necessity
Spillover costs
Private goods
Economics
15. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Spillover costs
Marginal Productivity Theory
Price Elasticity of Supply
Price inelastic demand
16. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Demand for Labor
Price elastic demand
Opportunity Cost
Perfectly competitive long-run equilibrium
17. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Law of Demand
Profit Maximizing Resource Employment
Four-firm concentration ratio
Economics
18. The marginal utility from consumption of more and more of that item falls over time
Cartel
Opportunity Cost
Law of Diminishing Marginal Utility
Average Fixed Cost (AFC)
19. Exists if a producer can produce more of a good than all other producers
Absolute Advantage
Marginal Revenue Product (MRP)
Accounting Profit
Economic Growth
20. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Spillover costs
Absolute Advantage
Income Effect
21. Ei = (%dQd good X)/(%d Income)
Income Elasticity
Law of Increasing Costs
Average Total Cost (ATC)
Determinants of elasticity
22. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Producer surplus
Long Run
Shutdown Point
Cross-Price Elasticity of Demand
23. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Spillover costs
Market power
Private goods
Substitute Goods
24. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Collusive oligopoly
Variable inputs
Positive externality
Marginal Product of Labor (MPL)
25. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Average Fixed Cost (AFC)
Shortage
Law of Increasing Costs
Non-collusive oligopoly
26. The price of a good measured in units of currency
Absolute prices
Positive externality
Shutdown Point
Perfectly elastic
27. TR = P * Qd
Total variable costs (TVC)
Total Revenue
Market Economy (Capitalism)
Fixed inputs
28. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Economies of Scale
Four-firm concentration ratio
Non-collusive oligopoly
Price elasticity
29. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Free-Rider Problem
Subsidy
Variable inputs
30. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Subsidy
Monopoly
Marginal tax rate
Determinants of Labor Demand
31. Exists if a producer can produce a good at lower opportunity cost than all other producers
Implicit costs
Long Run
Substitute Goods
Comparative Advantage
32. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Total Revenue
Constant cost industry
Least-Cost Rule
Utility Maximizing Rule
33. All firms maximize profit by producing where MR = MC
Relative Prices
Average Product of Labor (APL)
Profit Maximizing Rule
Positive externality
34. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Monopsonist
Dead Weight Loss
Determinants of Demand
Determinants of elasticity
35. Occurs when LRAC is constant over a variety of plant sizes
Absolute prices
Constant Returns to Scale
Subsidy
Market Equilibrium
36. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Increasing Cost Industry
Consumer surplus
Monopolistic competition
Diseconomies of Scale
37. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Economic Growth
Price elasticity
Income Elasticity
Monopoly
38. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Allocative Efficiency
Shutdown Point
Complementary Goods
Absolute prices
39. Ed = 1
Least-Cost Rule
Price floor
Surplus
Unit elastic demand
40. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Allocative Efficiency
Scarcity
Total Product of Labor (TPL)
41. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Economics
Unit elastic demand
Increasing Cost Industry
Fixed inputs
42. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Monopolistic competition
Public goods
Income Effect
Diseconomies of Scale
43. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Normal Goods
Marginal Benefit (MB)
Total Revenue Test
Spillover benefits
44. The imbalance between limited productive resources and unlimited human wants
Implicit costs
Consumer surplus
Variable inputs
Scarcity
45. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Luxury
Marginal Productivity Theory
Shutdown Point
Explicit costs
46. Ed = 0 - no response to price change
Perfectly inelastic
Price elasticity
Determinants of Demand
Non-collusive oligopoly
47. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Collusive oligopoly
Total Revenue Test
Incidence of Tax
Explicit costs
48. Ed < 1
Derived Demand
Monopolistic competition
Complementary Goods
Price inelastic demand
49. Ed = (%dQd)/(%dP). Ignore negative sign
Complementary Goods
Price elasticity
Total Fixed Costs (TFC)
Incidence of Tax
50. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Decreasing Cost industry
Productive Efficiency
Long Run
Marginal tax rate
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